Fin 571 Week 4 Research Paper

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Guillermo Furniture Store Concepts Paper Sandra L. Settles FIN/571 Corporate Finance October 29, 2012 Oscar S. Lewis Guillermo Furniture Store Concepts Paper Some corporations adopt finance concepts as a tool to identify, analyze and solve financial problems within the organization. Corporations use finance concepts to make investment decisions for both short and long term goals. In the Guillermo Furniture Store scenario, Guillermo Navallez operates a large furniture manufacturing company in Sonora, Mexico. Emerging competition and economic growth threaten to encroach on the company’s profitability margin. Guillermo must contemplate options which will improve efficiency and address changes in the industry as a constant endeavor to remain…show more content…
2007). The entry of a new competitor created a signal to Guillermo Furniture Store. Competition can sell furniture at rock-bottom prices using high-tech approach. This was an indicator for Guillermo to start making strategic business decisions and carefully weigh options to retain his market share. By analyzing actions of other companies in the market, Guillermo is taking advantage of the Behavioral Principle. Researching and evaluating competition’s best practices would serve as a guide to assist Guillermo make good decisions for his furniture…show more content…
2007). Guillermo’s Furniture Store patented process could be very profitable as it can be an explicit option that Guillermo can sell to the competition for a pre-specified price. Principle of Incremental Benefits states that “the value derived from choosing a particular alternative is determined by the net extra incremental benefit” (Emery, et al. 2007). Guillermo should weigh the incremental cost and benefit of purchasing a high-tech solution for the furniture store. The use of technology can improve cash flow in the long run. Principle of Risk-Return Trade Off states that “when all else is equal, people presser higher return and lower risk” (Emery, et al. 2007). Guillermo needs to determine the risk-return trade off from switching from manufacturing to distributing for the Norwegian competitor. Principle of Diversification is embraced by most prudent investors. Guillermo can diversify his business by becoming a distributor while retaining manufacturing and sale of high end custom furniture and market for flame retardant and finished

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